Angel investors are the top-funding source for GAN accelerators, and over the last few years, angel investment deals have more than doubled in size. Thus a strong relationship between angel investors and accelerators is key to help grow a startup business. Yesterday we were fortunate enough to have Marianne Hudson, Executive Director of the Angel Capital Association, join us on a call with our members. Marianne shared her insight on what angel investors are looking for and how the angel investor industry is evolving.
What Angel Investors Are Interested In
Location is still a high priority to the majority of angel investors, which is why connecting with your local angel investor group is imperative. Over the last six years the ideal distance of deals has grown from within only two hours of the angel to now within their region (usual within 6-8 hours of distance). It’s a common misconception that angel investors are centralized in just a couple small parts of the United States. Angels are widespread throughout the nation. In fact, angel groups in the Great Lakes region has recently seen slightly larger deals than the rest of the country.
When it comes to investing in startups the two most popular verticals are Internet and Healthcare (the healthcare deals are the largest, almost double the next tier of deals). The most common deals are with seed and early stage companies but angel investors are gradually gaining interest in later stage companies as a less risky investment.
As a startup, keep in mind that angels are looking for companies with a developed product, traction, and valuations that fit in both the company sector and the location of the company. When making significant investments, be mindful that angel groups would like seats on the board of the company. In general angels are interested in business models that will scale and are aiming for a quick exit (hoping for 5x-10x their investment in an exit).
Now for the money, the average amount angel groups invest is between $150-$500k with the typical investment being about $250k. Angel investment is growing quickly and in the last four years the median size of an angel investment deal jumped $500k (from $300k in 2010 to $800k in 2014).
The Future of Angel Investing
Angel investing is not only growing but evolving as well. Here are some of the trends that Marianne said she’s seeing in the angel investment industry.
- More methods to give and get investment are popping up. Mainly online tools for example; crowdfunding like Kickstarter is a great for market testing, syndicates are good for smaller, long distance investments, and LinkedIn for introductions.
- As options for online investing tools increases, so will the distance of angel investment deals.
- More women are becoming entrepreneurs and angel investors.
- A growing interest in social impact, veteran-owned, and minority-owned businesses will change the average type of deal.